Oil cannibalism

Dec 9, 2007 • rybinski

When a company launches a product that is in direct competition with its other products then we talk about product or brand cannibalism. In recent NYT article there is a suggestion that oil exporters behavior may lead to oil cannibalism. While oil exports are main source of these countries new financial wealth, rapid industrialization and inefficient oil use amid price subsidies will lead to massive growth of domestic demand for oil in largest oil exporting countries.Quote from the article follows:

“Experts say the sharp growth, if it continues, means several of the world’s most important suppliers may need to start importing oil within a decade to power all the new cars, houses and businesses they are buying and creating with their oil wealth.

Indonesia has already made this flip. By some projections, the same thing could happen within five years to Mexico, the No. 2 source of foreign oil for the United States, and soon after that to Iran, the world’s fourth-largest exporter. In some cases, the governments of these countries subsidize gasoline heavily for their citizens, selling it for as little as 7 cents a gallon, a practice that industry experts say fosters wasteful habits.

Rising internal demand may offset 40 percent of the increase in Saudi oil production between now and 2010, while more than half the projected decline in Iranian exports will be caused by internal consumption, said a recent report by CIBC World Markets.

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Perhaps surprisingly, though, some producing countries have surpassed the United States in oil consumption per person. They include Bahrain, Kuwait, Qatar and the United Arab Emirates.”